IDAHO PUBLIC UTILITIES COMMISSION

Case No. IPC-E-06-21, Order No. 30414

August 29, 2007

Contact: Gene Fadness (208) 334-0339,
890-2712

The Idaho Public Utilities Commission today approved a
negotiated settlement between wind developers and Idaho Power Co. over who
should pay for transmission upgrades required to accommodate about 200
megawatts of new wind generation planned in the Magic Valley.

To prevent transmission overload that could take place
with the new projects, Idaho Power maintained it needed to upgrade its
transmission system in the area at a cost of $60 million, a cost to be borne
primarily by wind developers. Jared Grover, a developer for the Cassia Gulch
Wind Park and Cassia Wind Farm, filed a complaint with the commission stating
all Idaho Power ratepayers, not just developers, would benefit from the
upgrades and should help pay for them. Further, Grover argued, requiring
developers to pay for the upgrades would threaten the economic viability of his
projects and stifle further development of renewable energy in Idaho.

Idaho Power has the transmission capability to handle the
anticipated 200 MW in new generation under normal circumstances. However,
existing transmission capacity is not sufficient to meet the company’s required
reliability standards during times of emergency, such as when transmission
lines are out of service.

After settlement discussions, Idaho Power and wind
developers agreed that the installation of equipment that would allow the wind
generators to reduce output during times of transmission constraint would
significantly reduce the amount of transmission upgrades required. The
equipment, to be installed at wind developers’ expense, would allow the wind
generators to reduce output when they receive a “redispatch” notice from Idaho
Power at least 10 minutes in advance of the time output needs to be reduced.

“The parties agree that redispatch should be a rare
occurrence,” the commission said. “If it proves otherwise, the commission
expects to be notified by the utility.”

With the ability to curtail generation during times of
transmission overload, the cost of needed upgrades is reduced from $60 million to
$11 million. The parties agreed on a formula to pay for the remaining $11
million. Idaho Power will pay all the costs for the first phase of a planned
five-phased upgrade. For the remaining four phases, 25 percent of costs would
be provided by the developer and 25 percent by Idaho Power Co., the latter to
be included in rate base for future recovery from customers systemwide. The
remaining 50 percent would be advanced by the developer, but refunded over a
term not to exceed 10 years after the projects are commercially viable. The
refunded amounts would then be included in rate base.

Requiring the wind developers to pay for at least 25
percent of upgrade costs is beneficial to all customers, the commission said,
because it creates an incentive for developers to consider economic
efficiencies when they choose locations for their wind farms. That reduces the
potential for the shifting of costs from the developers to the company and its
customers, which could occur if no upgrade costs were assessed against developers,
the commission said.

“We congratulate the parties on fashioning what we find to
be a workable, least-cost and reasonable solution to capacity and operational
constraints on the transmission system that will benefit Idaho Power, its
customers and Cassia,” the commission said.

The transmission upgrades, Idaho Power said, will provide
the company with a more robust transmission system serving the Magic Valley and
the Wood River Valley.

A complete copy of the commission’s order is
available on the commission’s homepage at www.puc.idaho.gov.
Click on the electric icon, then on “Electric Cases,” and scroll down to Case
No. IPC-E-06-21.